Oil boom, housing bust alter spending trends
The boom in shale drilling didn't cause as big a windfall in increased consumer spending for Pennsylvania since the recession ended as it did for other oil and gas states.
State-by-state data released Thursday for the first time by the U.S. Department of Commerce showed wide variation in spending by consumers — the engine of the nation's economy — since the recession ended in 2009.
The growth in Pennsylvania was barely ahead of the national average at 11 percent. Spending in North Dakota, where fracking has become a critical part of the state's economy, surged 28 percent from 2009 to 2012. And in Oklahoma, spending increased 16 percent.
It shouldn't be surprising that Pennsylvania didn't have the same gains as smaller energy-rich states, said Mark Price, an economist with the Keystone Research Center in Harrisburg. Despite the attention shale drilling gets, it accounts for less than a percent of all non-farm jobs and is going to have less of an economic impact than in rural states like North Dakota, he said.
“You throw a rock in a small pond and it's going to generate big waves that you can see,” Price said. “You throw a rock in an ocean, they still happen, but they're going to be more difficult to see.”
The data offered a picture of how the economic recovery has varied throughout the country. In states hit hard by the housing crisis, the recovery has been slower.
Spending increased 3.5 percent in Nevada and just 6.2 percent in Arizona, the two weakest states. Home values plummeted in both states during the housing crisis.
Pennsylvania's consumer spending figures bore out the post-recession narrative that many economists have told. That is, Pennsylvania did not experience the extreme rise in home prices during the boom years and did not fall as hard during the ensuing bust.
During the depths of the recession in 2008-09, per-capita spending fell 0.3 percent in Pennsylvania compared to a 2.5 percent decline nationwide.
“That's either associated with home prices values that didn't decline very sharply at all, or it could be associated with fracking, which was really ramping up during that time,” said Guhan Venkatu, an economist based in Pittsburgh with Federal Reserve Bank of Cleveland.
Pennsylvanians' per capita spending was $37,618 in 2012, higher than the U.S. average of $35,498. Health care accounted for the largest single category of spending in Pennsylvania, at $6,841, followed by housing and utilities, at $6,044. However, housing expenses were the only category in which Pennsylvanians spent less than the rest of the nation. The U.S. average was $6,415.
While the state saw no dramatic gains one way or another, there is something positive about that for businesses looking at setting up in the state, said Kurt Rankin, an economist at PNC.
“Whether it's high or low ranking, (consumer spending) is stable,” he said. “You can count on that opportunity to remain in place.”
Chris Fleisher is a staff writer for Trib Total Media. He can be reached at 412-320-7854 or firstname.lastname@example.org.